Press Release

VIS Maintains Entity Ratings of Omar Jibran Engineering Industries Limited
 

Karachi, May 14, 2020: VIS Credit Rating Company Limited (VIS), while maintaining the entity ratings of A-/A-2’ (Single A Minus/A-Two) assigned to Omar Jibran Engineering Industries Limited (OJEIL), has placed the same on ‘Rating Watch-Negative’ status. Long term rating of ‘A-’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Previous rating action was announced on April 23, 2019.

The assigned ratings to OJEIL incorporates company’s position as the single source supplier of several critical auto parts to leading automobile and motorcycle manufacturers including Indus Motor Company (IMC), Honda Atlas Cars Limited (HAC) and Atlas Honda Limited (AHL - manufacturers of Honda brand motorcycles). Rating also incorporate protective duty structure and existence of pass through mechanism related to raw material costs and significant exchange fluctuations. However, assessment of business risk profile incorporates inherent cyclicality in revenues which has impacted financial performance in the ongoing fiscal year. Moreover, automobile sales which were already on a downward trajectory since the beginning of current fiscal year are expected to slow down significantly amidst lock down in the country due to Covid-19 pandemic. Resultantly, pressure on financial profile is expected to persist with timing of recovery depending on duration and breadth of the pandemic. Comfort is drawn from expected principal deferment for a period of 1 year and support from regulator and an auto manufacturer in the form availability of concessionary loans.

The revision in rating outlook reflects prevailing uncertainty in auto sector dynamics due to coronavirus outbreak, prolonged lockdown, overall contraction in demand and challenging economic environment. Status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating Watch’ status. Given the compression in demand and expected impact on cash flows, ratings are being placed on ‘Negative’ outlook. Ratings remain dependent on improving financial profile, maintaining cash flow coverages and prudent leverage indicators. VIS will closely monitor and will accordingly take action to resolve the outlook status.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk


Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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